The Australian Government has set out the Federal Budget for the 2018/2019 Financial Year and there’s a lot to look through but let’s focus on what might have an immediate impact on you.

Pensioners

Under the expanded Pension Work Bonus if you are an age pensioner from July 1st 2018 you’ll now be able to earn more without it affecting your pension payment. Pensioners can now earn up to $300 per fortnight without it reducing their pension payment. With this in place pensioners can earn an extra $1300 per year more than what they could previously.

Tax Offset

For your average John/Jane tax payer the Government is introducing a Low and Middle Income Tax Offset of up to $530 a year. This will be available to the tax payer as a lump sum once the ATO issues their Notice of Assessment. The offset increases in increments for those earning between $37,000 and $48,000. Anyone earning between $48,000 and $90,000 will receive the maximum of $530. While those earning $90,000+ will find that the amount will gradually decrease to the point of being $0 at a taxable income of approximately $125,000.

Bracket Creep

The Government is also trying to eradicate “bracket creep”. For those unfamiliar with bracket creep this is where you earn a small pay increase that pushes you into the next income tax bracket. The problem is that now that you pay more tax you don’t really reap the benefit of receiving more income. The upper limit of the 32.5 per cent tax bracket is being pushed out from $87,000 to $90,000, while in the year 2022 they will also push out the 19 per cent bracket from $37,000 up to $41,000. Eventually the idea is that the 37 per cent tax bracket will be completely eliminated by 2024.

What does this all mean for you?

While some of these changes will come into effect in the new financial year others are still a year or more away. At the end of the day these new policy measures mean that pensioners can now work more and tax payers will now pay less tax. This just means more income for your average Jane/John! Make sure to keep an eye on these things as small changes brought on by the actions of the Government can mean big difference to your chances of obtaining the debt financing you’re looking for.

Many people are getting satisfaction watching the banks and other lenders get dragged over the coals. But what many don’t realise is that the Royal Commission will likely impact you too.

While the Royal Commission has been nothing but positive for the financial services industry, we haven’t seen too much written about how all of this will impact the end-customer (i.e. you). Reformed lending processes and procedures will likely test your patience as you’ll be asked more probing questions by lenders. Banks might even tighten their screws on certain types of lending.

To understand why things may get a little more difficult, here’s a quick “crash course” on the responsible lending obligations of lenders.

Responsible Lending

Any credit licensee engaged in consumer lending needs to comply with responsible lending as set out in the National Consumer Credit Protection Act 2009. In laymen’s terms, lenders need to ensure that they do not lend to a customer if the loan is unsuitable.

In order to meet responsible lending obligations, three steps must be undertaken for the lender to be compliant:

1. Make reasonable enquiries about the consumer’s financial situation, and their requirements and objectives;

2. Take reasonable steps to verify the consumer’s financial situation; and

3. Make a preliminary assessment (if providing credit assistance) or final assessment (if you are the credit provider) about whether the credit contract is ‘not suitable’ for the consumer. This is based on the enquiries and information obtained in the first two steps.

Now, if you have applied for a personal loan in the past you may be familiar with the loan application process. Lenders will conduct certain checks on your income and expenses and get your agreement on certain conditions. This is done in part to fulfil responsible lending requirements.

Since the Global Financial Crisis responsible lending criteria has tightened considerably to reduce irresponsible lending. APRA and ASIC are demanding lenders constantly review their lending policies to make sure they aren’t putting consumers at risk.

Post the GFC, the Royal Commission is the latest major event to reform lending policy and procedures in Australia.

How Will The Royal Commission Affect You?

Simple answer – loan applications may take longer. In an age where customers expect immediacy and instant gratification, the Royal Commission will likely create more prudent loan processes and procedures. This may test your patience as lenders will have more questions to ask.

So What Are We Doing About It?

OurMoneyMarket applies the latest technology throughout its application process to solve logistical problems such as the above. This also allows us to provide a frictionless user experience. A good example of how we streamline the application process is that we directly pull applicant’s bank statements from their bank account via a secure online portal. Too easy. This makes income verification quick and simple.

Most personal budgeting tips/tools will advise you to focus on setting goals. I’ll quickly breakdown how they work:

1. Set a goal of how much you believe you need to save to have the “thing” you want;

2. Determine over what timeframe you would realistically like to have that “thing”; and

3. Based on steps 1 and 2, calculate how much you will need to set aside each fortnight to achieve this financial goal.

Maintain commitment and discipline over this timeframe to achieve this goal and accept that you will have to make sacrifice today to achieve what you want in the future.

Cool. So, some people can do that. Most people, however, are committed to doing other things in their life, so managing personal finances takes a back seat. What these people need is their spending to be passively regulated – because they aren’t interested in doing it themselves. Here are 3 simple tips you can implement that will control your spending and save you money.

Save What You Can Spend

How much do you think you would reasonably spend a month on general living expenses (e.g. food, entertainment, transport, utilities etc.)?

I’m guessing many of you thought between $750 to $1,250 a month. You’re probably wrong.

If you were to simply add up your expenses from last month I’d guess most people would find themselves spending between $1,750 to $3,000 a month. When you add on your rent and any large one-off expenses (insurance, school fees etc.) it will explain why you’re struggling to clear the balance on your credit card, or never seem to have enough funds to get you through to next payday.

Try this instead. Set up a spending account that has a simple debit card linked to it. A quick call to your bank can have this set up in around 5 minutes (excluding the waiting and transfer times of course!). On the call ask the banker to set up a direct debit to send funds each week/fortnight/month (however frequently you get paid) from the account your pay goes in to, into this new spending account. The amount you are transferring each time is the exact amount you thought a moment ago was a reasonable expenditure for weekly/fortnightly/monthly general living.

This is a behavioural finance technique, and what it does is that it begins to regulate your spending, whilst reminding you in a more obvious way of how much you are spending. Kind of like flicking an elastic band against your wrist each time you do a taboo habit. It also means if you want to spend more money next week, you’ll have to spend a little less this week.

2. Have Your Salary Paid Directly into a Savings Account

By having your salary paid directly into your savings account you are saving by default as opposed to “opting in” to saving. This tip goes hand in hand with tip number 1. It also means that each time you want to spend more than what is available in your spending account, you’ll have to undergo the “walk of shame” and physically transfer money out of your savings account – this is because banks don’t let you spend directly from a savings account. This technique again passively regulates your spending for you.

Side note: I recently came across an article written by a major bank that had some advice for people setting up accounts for their new job. In it, the bank advised that it was better to have your income paid into your spending account, rather than your savings account. The reason being that it’s easier to spend your money when it’s in that account. Please note, it also means they will pay you less interest.

3. Plug the Hole

All your day to day direct debits should be set up on your spending account (e.g. utilities, subscriptions, memberships etc.). Why? Because when you run out of the funds in your spending account you will be forced to do an audit of where the money is going. Through this process you will likely find that you’re spending a fair bit of money on pointless things, things you don’t use, or too much on somethings. Some common cash leakages we see in borrowers accounts are listed below

Common Cash Leakages

Common cash leakages include:

There are plenty of other common expenses we waste money on without really knowing that we are. If you feel your personal finances are a bit like a sinking ship, don’t pick up a bucket and toss the water out, plug the hole(s).

Summary

By following the simple steps above you should be able to start saving some money by default without having to actively think about saving. We think these are 3 of the most simple budgeting methods that will help you save money without you even knowing you are!

# Maldives

Have holiday finance or a holiday loan and wondering where to go? How about the unrivalled luxury, stunning white-sand beaches and an amazing underwater world making the Maldives and obvious choice for a truly memorable destination. The weather is amazing all year round. This allows you to unwind for a while, taking in the ocean scents. A must to visit would have to be, Huvafen Fushi. My husband and I spent our honeymoon there. This Private Resort Island Retreat, includes the world’s first underwater spa, waterside dining, your own private beach and plunge pool, you even have your own 24-hour butler at your service. I have never experienced such luxury and service and it was all made possibly by cheap holiday finance. Yes, this place is the only 6-star resort in Maldives.

#2 Singapore

This country is truly amazing, it’s fresh, buzzing with life and would have to be the cleanest country I’ve ever visited. Capitalising on its melting pot of cultures, Singapore has a real spark about it, and is fast becoming Asia’s number one destination for tourists. The shopping is endless, and kicks-off as soon as you arrive at Singapore’s amazing airport! Shops open till 11pm in Singapore, which is a girl’s heaven. There nightlife is amazing, with several rooftop bars, taking advantage of the gorgeous warm weather and great views.

#3 Lebanon

Everyone thinks “war torn country” when you mention Lebanon, yes, it’s been through its share of it, but for the most, especially Beirut, it's simply wonderful. The architecture throughout Lebanon is stunning and could best even France and Italy. This country is truly amazing, there is so much culture and beautiful history, which I didn’t appreciate until visiting. The food is also first class, everything is done fresh and in-expensive if you know where to go. What surprised me was the nightlife, it never stopped, people were in the streets celebrating any occasion – so full of life!

#4 Australia

Most Australians take this country for granted. We live in the most beautiful place on earth. We have great beaches, weather, food, the most amazing islands with gorgeous reefs and wildlife, all in one place. My tip though, if you truly want to enjoy luxury living, try a rejuvenating spa and some fine dining at the Great Barrier Reef, Hayman Island. This is one of my favourite places on earth. The service is immaculate, there is great food and amazing weather. Fun fact: Hayman Resort has the largest pool in the world!

#5 Hong Kong

Visit Hong Kong to shop, dine and wine till you drop and then kick back in a tea house or swanky bar, with spectacular views of immaculately kept lush gardens. Once you’ve got your energy back take in the supercharged night life that Hong Kong has to offer – this city does not stop.

So why don’t you stop dreaming and start living. Obtain a free, no obligation, interest rate quote with OurMoneyMarket today and turn those holiday dreams into fond memories. Best of all, with holiday finance, all our quick rate quotes won’t impact your credit score and can be completed online in minutes!

Comprehensive Credit Reporting sounds pretty boring, but it’s worth knowing about. It could have a big impact on your personal finances, including:

Here’s why.

Comprehensive Credit Reporting involves these things called Credit Bureaus. Credit Bureaus are companies that capture credit information from lenders and in return use the data to provide lenders with Credit Scores on each applicant. A low credit score (e.g. -200 to 450) is bad and a high credit score (e.g 550 to 1200) is good. These Credit Scores give lenders an indication of your likelihood of repaying the debt.

This then becomes a key factor in your chance of obtaining a loan. Until recently, credit bureaus only captured “negative” data for their assessment of your likelihood to repay. Negative data could include if you have defaulted before or applied for credit too often. One of the only real ways to fix it was time – a long history of no defaults. This meant accidentally applying for a payday lender or getting too trigger happy when shopping for a good deal on a loan, could quickly put you in a position where a bank wouldn’t lend to you. This is because each enquiry would lower your credit score.

Enter Comprehensive Credit Reporting

An increasing number of lenders are now reporting to the Credit Bureaus your current repayment performance on your existing loans and credit cards. So what?

Well this means that if you’re doing the right thing and paying your debts on time your score goes up! This means that you may be able to negotiate a lower rate on your loans, or access more credit if you need it. It should also be a warning to those that are falling behind on their payments. It will become increasingly more difficult to access cheap credit if you aren’t managing your finances well.

Please message us on Facebook if you have any questions about this article. If you found our article helpful in any way, please don’t forget to share us with your friends by liking our Facebook page.

Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.

Interest Free Loans – Would a company ever lend you money for free? Sadly the short answer is no. I’ll explain in 10 minutes how interest-free finance products work and how you’re still being charged for it.

Interest Free Finance Periods

This is a pretty common one when shopping online, getting a quote for home renovations, purchasing white goods – things like that. Typically you’ll be offered 3 – 12 months Interest Free. So how do you get caught with Interest Free Periods?

1. During the interest free period you’re going to be required to only make a modest principal repayment (i.e. no interest, just a payment that reduces your loan amount). However, at the end of the interest free period you will start getting charged rates usually between 19.99% – 29.99%. Now the vast majority of people will elect to make the minimum repayment during this interest free period. This means that at the end of the interest free period you’re stuck with a loan that isn’t too different to what it was 3-12 months ago. But you now you have a loan on a higher interest rate compared to if you just took out a normal personal loan. Damn.

Most people can’t resist the honeymoon rate! So savvier borrowers think (a) I’ll pay it off within the interest free period; or (b) refinance the debt at the end of the interest free period. The lender knows this could happen, but they also know that for most people this won’t happen. Life admin takes a back seat, unexpected expenses come up, or you realise the repayments are just too high to fully pay the loan off within such a short time frame, so you’re stuck paying 19.99% – 29.99% p.a. It sucks, and the lender loves it.

2. The merchant or service provider is paying for that interest free period you receive. This means that one of two things will often occur. 1) The merchant increases the price of any service it’s offering you interest free finance on, or 2) they charge you a transaction fee to help absorb the cost of you taking up the finance. Either way, you pay for it.

No Interest Ever Finance

Often seen when shopping online, getting home renovations done, installing solar panels etc. Basically, these products claim you will never pay interest on their loan, and technically this is true. So how do they get you with No Interest Ever facilties?

1. Fees: The cost of the fees you are charged on No Interest Ever products add up. If you borrow $1,000 and pay, for example, a $6 monthly fee, you’re effectively paying an interest rate of 22% p.a. Ouch! This doesn’t include any establishment fee or transaction fee you may be charged. These providers often claim that you won’t be charged the fee if you clear the balance by the end of the month. Again, they know that most won’t be able to do this. After all, if you had a spare $1,000 you probably wouldn’t have taken out finance.

2. Inflated Purchase Price: Common when visiting a car yard to purchase a new car or doing home renovations. The 0% finance option means that there is no flexibility on negotiating a lower price for the goods or service, but most importantly the price of the goods or service has likely been increased to cover the cost of offering the 0% finance promotion. In the home improvement space this can be an increase of anywhere between 5% to 25%.

3. Hidden Fees: Look our for early prepayment fees, transaction processing fees. These add up to a lot over the term of a loan. What do you do? If you think you can pay something off within an Interest Free period than that’s a great deal. Why? Well it is the cheapest bridging finance you could hope for. However, a simple, transparent, low rate loan, where you know for certain what you will be paying for might be a better option. This will result in you paying less interest or fees in the long run. Please message us on Facebook if you have any questions about this article. If you found our article helpful in any way, please don’t forget to share us with your friends by liking our Facebook page.

Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.

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